CELM,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.03B
• Operating Income: ¥710M
• Net Income: ¥295M
• EPS: ¥18.46

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

SELM Co., Ltd. (7367) reported strong FY2026 Q2 consolidated results under JGAAP, with revenue of ¥5,031m, up 42.0% YoY, indicating robust demand and/or successful expansion initiatives. Operating income rose 46.9% YoY to ¥710m, outpacing revenue growth and implying positive operating leverage and cost discipline. Net income increased 34.4% YoY to ¥396m, with a net margin of 7.87%, underpinning solid profitability at the half-year mark. The DuPont-derived ROE of 12.95% reflects healthy returns driven by a balanced mix of margin, asset efficiency (asset turnover 0.69x), and moderate leverage (financial leverage 2.38x). Gross margin is cited at 37.2%, consistent with the reported net profitability trajectory; however, there is an internal inconsistency between the disclosed cost of sales and gross profit line items, so margin commentary relies on the provided gross margin metric. Operating margin of roughly 14.1% (¥710m/¥5,031m) signals effective SG&A control alongside scale benefits. Ordinary income (¥687m) is slightly below operating income, indicating minor non-operating losses despite minimal interest expense, suggesting other non-operating items weighed on ordinary earnings. The effective tax rate is approximately 32.5% (¥190.8m tax on an estimated ¥586.8m pre-tax income), even though a 0.0% “effective tax rate” appeared in the calculated metrics; this 0% should be treated as unreported. Liquidity appears sound with a current ratio of 147.1% and working capital of about ¥918m, supporting ongoing operations and growth. Solvency is reasonable with liabilities-to-equity at 1.46x and interest coverage at 334.7x, implying a low near-term refinancing risk. Operating cash flow of ¥235.5m trails net income (OCF/NI 0.59x), pointing to working capital absorption or timing effects; this is an area to monitor for earnings quality. Financing cash flow was a sizable outflow of ¥899.5m, likely related to shareholder returns or debt reduction, but details are not disclosed. Several items are unreported or shown as zero (e.g., cash balance, inventories, equity ratio, DPS), which limits precision on liquidity buffers, quick ratio, and dividend analysis. Despite disclosure gaps, the combination of top-line momentum, margin expansion, and robust ROE paints a favorable fundamental picture for the period. Sustainability of growth will hinge on order intake, client retention, pricing power in leadership/HR-related services, and the normalization of working capital. Overall, the operational trajectory is positive, with manageable financial risk and a need for improved cash conversion to solidify earnings quality.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 7.87% (NI ¥396m / Revenue ¥5,031m)
• asset_turnover: 0.69x (Revenue ¥5,031m / Total assets ¥7,293m)
• financial_leverage: 2.38x (Total assets ¥7,293m / Equity ¥3,059m)
• calculated_ROE: 12.95%, consistent with reported margin_quality: Reported gross margin 37.2% supports an operating margin of ~14.1% and net margin of 7.87%. Note a discrepancy between cost of sales and gross profit figures; analysis relies on the stated gross margin and bottom-line metrics. Ordinary income slightly below operating income suggests small non-operating losses beyond interest expense. operating_leverage: Operating income growth (+46.9% YoY) exceeds revenue growth (+42.0% YoY), indicating positive operating leverage. EBITDA margin of 14.7% (EBITDA ¥738.8m) aligns with improved scale benefits and controlled SG&A.

Growth Assessment

revenue_sustainability: Revenue growth of +42.0% YoY is strong; sustainability will depend on repeat business from enterprise clients, cross-sell of leadership/HR development programs, and macro conditions affecting client HR budgets. profit_quality: Net income +34.4% YoY with stable tax rate (~32.5%) and minimal interest burden indicates core improvement. However, OCF/NI at 0.59x signals weaker cash conversion this period, potentially due to receivables timing or project mix. outlook: With operating leverage evident and interest costs negligible, near-term profitability should remain resilient provided demand persists. Key dependencies include order backlog conversion, utilization rates of consultants/trainers, pricing power, and any seasonality into 2H.

Financial Health

liquidity: Current ratio 147.1% and working capital ~¥917.8m indicate adequate short-term liquidity. Quick ratio cannot be reliably inferred due to inventories reported as zero (unreported). Cash balance is unreported. solvency: Liabilities-to-equity at 1.46x and asset-to-equity (financial leverage) at 2.38x denote moderate leverage. Interest coverage is very strong at 334.7x (EBIT/interest), implying low refinancing risk. capital_structure: Total assets ¥7,293m funded by equity ¥3,059m and liabilities ¥4,476.7m. Ordinary income below operating income implies some non-operating drag; otherwise, capital structure pressure appears limited this period.

Cash Flow Quality

earnings_quality: OCF ¥235.5m vs NI ¥396m (OCF/NI 0.59x) indicates weaker cash conversion; likely drivers include receivables growth or other working capital uses typical in project-based services. FCF_analysis: Investing CF is shown as zero (unreported). True FCF cannot be determined without capex detail; using OCF alone would overstate sustainable FCF. Financing outflow of ¥899.5m suggests shareholder returns or debt reduction, but specifics are not disclosed. working_capital: Working capital stands at ~¥917.8m. Changes in receivables and contract assets are the probable swing factors; monitoring DSO and billing milestones is important to improve cash conversion.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are presented as zero (unreported). With NI positive and OCF positive but below NI, capacity for cash distributions exists in principle, but actual policy cannot be inferred from the data. FCF_coverage: FCF cannot be calculated due to unreported capex. Hence, FCF coverage of dividends is indeterminable. policy_outlook: Given sizable financing outflows, the company may be engaging in shareholder returns or debt service; absent explicit DPS data, dividend policy clarity is limited. Monitoring board communications and capital allocation disclosures is necessary.

Risk Assessment

Business Risks:

• Demand cyclicality tied to client HR and training budgets
• Competition in leadership development and HR consulting markets
• Client concentration risk if large accounts dominate revenue
• Project timing and seasonality affecting quarterly volatility
• Talent acquisition and retention of consultants/trainers
• Execution risk in new service offerings or digital delivery

Financial Risks:

• Weaker cash conversion (OCF/NI 0.59x) from working capital swings
• Limited visibility on cash balance due to unreported cash and equivalents
• Potential non-operating losses affecting ordinary income
• Interest rate risk currently minimal given very high coverage, but could rise with higher leverage
• Refinancing or covenant risks unknown due to lack of debt schedule disclosure

Key Concerns:

• Inconsistency between reported cost of sales and gross profit; reliance on stated gross margin
• Unreported items (cash, inventories, equity ratio, DPS) constrain precision in liquidity and dividend analysis
• Sustainability of accelerated growth amid macro uncertainty in corporate spending

Investment Implications

Key Takeaways:

• Strong top-line growth (+42% YoY) with margin expansion drives ROE of ~13%
• Positive operating leverage evident as operating income growth outpaces revenue
• Cash conversion lagging NI (OCF/NI 0.59x) warrants monitoring
• Leverage moderate; interest burden de minimis with coverage >300x
• Large financing outflow (~¥900m) suggests active capital allocation, details undisclosed

Metrics to Watch:

• Order intake/backlog and client retention rates
• Gross and operating margins (validate against cost classification)
• OCF/NI ratio, DSO, and working capital turns
• Ordinary income vs operating income (non-operating items)
• Capex and investing cash flows to assess true FCF
• Leverage ratios (Liabilities/Equity) and any debt maturities

Relative Positioning: Within Japan’s HR development/consulting space, SELM exhibits above-peer revenue growth and solid ROE with low interest burden, balanced by weaker cash conversion and disclosure gaps that temper visibility on liquidity buffers and shareholder return policy.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis